1. Unit 8: Amateurism and College Sports
Economics of Sports
Unit 8: Amateurism and College Sports

2. Amateurism and the Olympic Ideal
Ancient Olympians were not amateurs
Winners were well rewarded by home cities
Origin of Modern Olympics
Created by Pierre de Coubertin, a French aristocrat
He felt humiliated by France’s loss of Franco-Prussian War in 1871
He wanted to show France how to restore its honor (and beat the Prussians)
According to the definition issued by the Amateur Athletic Club of England in 1866, an amateur was ‘any gentlemen who has never competed in an open competition, or for any public money, or for admission money, or with professionals for a prize, public money, or admission money, and who has never in any period of his life taught or assisted in the pursuit of athletic exercises as a means of livelihood; nor as a mechanic, artisan, or labourer.’

3. De Coubertin and the Olympic Ideal
De Coubertin was a great Anglophile,
He found his solution in British “public” schools
Mens sana in corpore sano (A sound mind in a sound body)
“The Battle of Waterloo was won on the playing fields of Eton” (Attributed to the Duke of Wellington)
Amateurism reflects British class snobbery
Aristocrats refused to compete with “lower classes”
They restricted competition
Any manual laborer was not considered an amateur

4. Amateurism and the United States
More combative than British
Commercialism and corruption were ever-present
The first intercollegiate competition had corporate ties
Harvard v. Yale in crew (1852)
Was sponsored by a railroad promoting a nearby resort
The rematch brought the first eligibility scandal
Harvard’s coxswain had already graduated
The first football game and the first scandal
Rutgers v. Princeton November 6, 1869
Four of Rutgers’ players were flunking math

5. The NCAA and Monopsony Power
Does it defend academic ideals?
Restricted movement prevents “tramp athletes”
In early 20th century athletes were hired guns
Transferred from school to school for best deal
Does it just drive down pay?
Players have highly limited mobility
Players have no say over compensation
Star players are worth millions to schools
But all they receive is tuition and some fees
In the movie Horsefeathers Groucho Marx goes to a speakeasy find football players for Huxley University.

6. Athletic Scholarships
Now source of great excitement
Not always the case
NCAA forbade them until 1956
NCAA rules often ignored
They were the cause of the “Seven Sinners” fiasco
The NCAA’s justification of scholarships
They would be easier to police if out in the open
Analogous to drugs or prostitution
Prevented workman’s compensation claims

7. The “Student Athlete” Scholarships created a problem
Students were effectively employees
They began to seek workmen’s compensation for injuries “on the job”
Student athlete is a legal term
Players must disavow any desire for pay
As a result, colleges do not have to provide workmen’s compensation

8. The NCAA as a Cartel Controls access to desirable broadcasts
Bowl games
Basketball tournament
Has to figure out how to divide profits
An efficient cartel will base rewards on efficiency

9. The NCAA as an Efficient Cartel
Allocates greatest share of profit to colleges that are “most efficient”
Schools that progress farthest in tournaments
Schools that belong to “major” conferences
Football divided into Divisions
Smallest are Division III and Division II
Largest schools are subdivided
Football Championship Subdivision
Football Bowl Subdivision

10. The Bowl Championship Series
The BCS is not an NCAA organization
It was created by TV networks and the “major” football conferences
Its goal is to generate revenue for these two groups
Schools from non-BCS conferences make far less
University of Utah has begun an antitrust suit against the BCS

11. College Athletics as an Investment
Very few college athletes make it to the professional ranks
It might still pay
Long and Caudill (1991) show that athletes make more in later life than non-athletes
Study does not separate athletes by college or sport
A Swarthmore squash player counts as much as an Ohio State football player

12. Athletic Success and Academic Success
Most successful men’s programs often have poor graduation rates
Graduation rates of players at top 25 football programs in 2008
On average they were 10% below other student-athletes
Only one school (Cincinnati) had a higher graduation rate
The same pattern holds for men’s basketball in
Women’s programs did not show the same trade-off
Students at the top programs generally had higher graduation rates than the typical student athlete

13. Why do Some Sports Do Worse?
Some athletes less prepared for college
SATs, class rank, and gpa lower
True for “money sports’ like basketball and football
Not true for softball or golf
Dropping out might be a rational investment
Do football players go to Florida to get to NFL?
Do football players go to Harvard to become physicists?

14. Academic Standards Preserve academic integrity
Don’t recruit unqualified students
Create a barrier to entry
Established powers keep out new entrants
Competitors cannot pay athletes more
Now cannot take weaker students either

15. History of Standards No uniform rules until 1965
1.600 Rule – a complex formula projected gpa
To play needed projected gpa
1973: Replaced with 2.00 rule
Ostensibly created higher standards
Actually needed C+ average in high school
Could take any courses
Worst abuses came under this rule

16. Proposition 48 Provisions Was Prop 48 Racist?
Needed SAT=700 & GPA=2.00 in 11 core courses
If not: no scholarship in 1st year & cannot play
Was Prop 48 Racist?
Disproportionately affected black athletes
SATs for blacks average 200 points lower
Are SATs a valid predictor of college performance?
Still – graduation rates rose for whites and blacks
A concession: Partial Qualifiers
Could receive aid if pass one criterion

17. Proposition 42 Meant to eliminate partial qualifiers
Again accused of racist impact
Partial qualifier restored – and widened
Under Prop 48 scholarship “counted” against college’s athletic limit
Under 42 it did not count

18. Proposition 16 Created a sliding scale
Lower gpa permitted if SATs higher & vice versa
Clearinghouse evaluated individual courses
Understaffing caused embarrassing errors
Honors classes with unusual names got flagged
Allows partial qualifiers to practice
Challenged in court
Students claimed disparate racial impact
Won initial case
Verdict overturned on technicality
NCAA does not disburse federal funds

19. Latest Revision Eases initial restrictions
14 core courses (up from 13)
Sliding scale
2.0 core GPA requires 1010 SAT
3.55 core GPA requires 400 SAT
No Partial Qualifier status
Stiffens progress requirements
Need 40% of degree requirement by 3rd year
Need 60% of degree requirement by 4th year
Need 80 % of degree requirement by 5th year

20. Academic Progress Rates (APR)
School scored for student progress
1 point if athlete stays enrolled
1 point for staying academically eligible
Computes % of total possible points
Consider a typical big-time basketball team
52 possible points (13 players *2 points*2 semesters)
If one player is ineligible in spring – it loses 1 point
APR=100*(51/52)=981
If its score falls below 925, the school could lose scholarships

21. Are Athletics Profitable?
Most men’s sports are not
Only football and basketball make money
Only for Division I & IA
Most FBS schools and almost all FCS schools lose money on athletics
Almost all women’s sports lose money
Women’s basketball is most profitable women’s sport
But almost all of them lose money

22. Then Why Bother? Some say the benefits are understated
Athletics provide a sense of identity at large schools
Athletic success raises a school’s profile
Improves state schools’ chances for state funding
Attracts more and better students
Some say the costs overstated
What does a scholarship really cost?
The tuition of a displaced student
If no one is displaced there is no opportunity cost
Expenditure is endogenous
Athletic Directors do not maximize profit
As revenues go up – they simply spend more